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Foreign direct investment and agglomeration: evidence from Italy

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  • Raffaello Bronzini

    () (Banca d'Italia)

Abstract

A number of empirical studies have analyzed the effect of agglomeration on multinational investment, verifying whether the agglomerated areas attract foreign direct investment inflows. Despite the large number of papers, no systematic attempt has been made to disentangle whether FDI are attracted by the concentration of firms within the same sector (specialization) or within different sectors (diversity). Furthermore, the question whether firm size in the host area influences multinational investment is still unanswered. This paper provides empirical evidence of the role of agglomeration economies in attracting foreign direct investments within Italian regions and provinces, distinguishing between specialization and diversity, and of the role of firm size in foreign investors� choices. We employ a new territorial data set on foreign direct investment collected by the Italian Foreign Exchange Office for industrial and service sectors. We find strong evidence that specialized geographical areas attract FDI, whereas diversified areas do so only for industrial sectors; finally, there is little evidence that firm size has an impact on FDI since, if anything, only big firms in southern regions appear to have a positive effect on foreign investors� decisions.

Suggested Citation

  • Raffaello Bronzini, 2004. "Foreign direct investment and agglomeration: evidence from Italy," Temi di discussione (Economic working papers) 526, Bank of Italy, Economic Research and International Relations Area.
  • Handle: RePEc:bdi:wptemi:td_526_04
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    References listed on IDEAS

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    Cited by:

    1. Roberto Basile & Luigi Benfratello & Davide Castellani, 2005. "Attracting Foreign Investments in Europe - are Italian Regions Doomed?," ERSA conference papers ersa05p148, European Regional Science Association.
    2. Laura Resmini, 2014. "Patterns of FDI in Southern European Periphery: a Tale of Missing FDI?," ERSA conference papers ersa14p543, European Regional Science Association.
    3. Giulio Cainelli & Eleonora Di Maria & Roberto Ganau, 2011. "Agglomeration, related-variety and internationalisation. Does a relationship exist?," Openloc Working Papers 1114, Public policies and local development.
    4. Chen, George Shih-Ku, 2009. "Agglomeration economies and the location of Taiwanese investment in China," MPRA Paper 13896, University Library of Munich, Germany.
    5. Glauco De Vita & Andrew Abbott, 2007. "Do exchange rates have any impact upon UK inward foreign direct investment?," Applied Economics, Taylor & Francis Journals, vol. 39(20), pages 2553-2564.
    6. Roberto Basile & Luigi Benfratello & Davide Castellani, 2005. "Attracting Foreign Direct Investments in Europe: Are Italian Regions Doomed?," Rivista di Politica Economica, SIPI Spa, vol. 95(1), pages 319-319, January-F.
    7. Roberto Antonietti & Giulio Cainelli, 2007. "Spatial Agglomeration, Technology and Outsourcing of Knowledge Intensive Business Services Empirical Insights from Italy," Working Papers 2007.79, Fondazione Eni Enrico Mattei.

    More about this item

    Keywords

    foreign direct investment; agglomeration economies; regional economics;

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General

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